Tick, Tick, Tick, Tick
Tick, Tick, Tick
Sitting in the dark
Waiting for the start
The start of something new
Running into walls
Holding every breath
Inspite of turning blue
No telling how much longer I will feel this way.
-- "Time Bomb" Rachel Bolen (Skid Row), 2022
Tick, Tick, Tick, Tick...
Another moderately quiet day. Another day of sub-moderate volatility. The VIX has primarily remained between 16.5 and 18 since moving into that range on May 5. With the exception of some late April, early May gyrations, the fear index has largely been stuck between 16 and 20 since late March.
Tick, tick, tick, tick...
The U.S. 10-Year Note has paid as much as 3.6% and as little as 3.3% over that same time frame, but has for the most part, for two months, yielded anywhere from a "tick" under 3.4% to a couple of "tick's below 3.6%.
In need of a catalyst? We've gone through the monthly macro cycle a couple of times already. That's employment data, inflation-based data, housing, you name it. We've gone through Fed policy meetings, as well as the aftermath of a regional banking semi-crisis. Is this eerily silent environment, the aftermath of that "semi-crisis?" Is it? Or maybe, chess pieces simply are not moved ahead of a potential U.S. default.
No one really thinks that the U.S. will default on its own sovereign debt, do they? We'll learn more today (Tuesday) as President Biden meets with Speaker McCarthy and other key legislators to discuss this threat specifically. Or will we?
On Monday, Speaker McCarthy, who has taken on the mantle of leadership on the right, said, "We are nowhere near reaching a conclusion." McCarthy described staff-level meetings that some had hoped were moving the ball forward as "not productive at all."
You know what, within the realm of financial markets, has been moving? Extremely short-term U.S. paper, that's what. The U.S. One-Month (30-day) T-Bill currently yields 5.78%. Less than a month ago, that yield stood at 3.31%. Oh...
Crystal Ball
Concerning the debt-ceiling impasse, JPMorgan ( JPM) strategist Marko Kolanovic reiterated his call to remain underweight equities for now: "While we acknowledge that at the time the severe selloff in risk assets due to the August 2011 U.S. debt ceiling issue was amplified by the Euro debt crisis, it would be difficult to avoid at least a modest selloff in risk assets if the debt ceiling issue goes down to the wire as in August 2011."
On the economy, Kolanovic added: "Overall, we continue to see long-term leading economic signals pointing to bad times while the market makes rosier assumptions. A rally built off of a handful of stocks can easily reverse."
Monday Funday
So, equity markets headed south on Monday, right? Not exactly. Even as Treasury Secretary Janet Yellen's estimated "zero-date" of June 1 draws closer, even as Atlanta Fed President Raphael Bostic said quite publicly that he sees no short-term interest rate cuts until well into 2024, and even as the macroeconomic data continues to disappoint.
Equity markets went mostly green on Monday. Winners beat losers by roughly 2 to 1 at both of New York's key exchanges. Advancing volume took a 73.6% share of composite NYSE-listed trade and a 69.7% share of composite Nasdaq-listed trade. Seven of the 11 S&P sector SPDR ETFs shaded green for the session, while four went red. All four sectors that went red on Monday were those we consider to be "defensive" in nature. Is that a message? Materials ( XLB) and Technology ( XLK) led to the upside. That sounds kind of cyclical and "growthy" at the same time.
The semis ran hot. While most equity indexes moved higher, the gains made were not very large at the headline level. The S&P 500 gained just 0.3%, while the Dow Industrials finally put that five-day losing streak to bed with a gain of just 0.14%. However, the Nasdaq Composite was stronger (+0.66%) as the Philadelphia Semiconductor Index popped for 2.68% (Micron ( MU) was named a favorite by Citigroup ( C) ) and the KBW Bank Index took back 2.56% as the regionals found a bid.
However, trading volume remained light. Volumes appear to be moving sideways at low levels for NYSE-listed stocks and continue to dwindle for Nasdaq-domiciled names. Aggregate trade for the S&P 500 has not touched the 50-day trading volume simple moving average for that index since May 4. Aggregate trade across the Nasdaq Composite has not touched that metric since May 3.
Ugleeeee!
This morning, the Census Bureau will put April Retail Sales to the tape at 08:30 ET, while the Federal Reserve drops April Industrial Production at 09:15 ET. We'll hear from the Atlanta Fed later this morning when they update their "real-time" GDPNow model for the second quarter. The model has not been updated since May 8, but will also have to be updated tomorrow after April Housing Starts cross the tape.
However, this week's macroeconomic data got off to an awful start on Monday, as the New York Fed posted its May edition of the Empire State Manufacturing Survey. The headline print landed at -31.8, down from April's +10.8, and well, well, well below the -3 or -4 that most economists were looking for.
Within the report, New Orders (the survey's single most important component) crashed to -28.6, while Shipments, Unfilled Orders, and Inventories all went negative and Number of Employees and Average Workweek (both already negative) showed further erosion. Only two components showed robust growth: Prices Paid and Prices Received. That, my friends, is not good.
That survey was not the only item released by the NY Fed on Monday. They also released data that showed U.S. Households adding $148B in overall debt during the first quarter, bringing the total to $17.05T. According to Bloomberg News, "Balances are now $2.9T higher than they were just before the pandemic."
The report also showed that for the first time in 20 years, U.S. consumers did not pay down some credit card debt during the first quarter. U.S. consumers regularly build up credit card debt during the last quarter of the year as the holidays hit and then pay down at least some of that debt as income tax refunds roll in. The report states "Credit card balances were flat in the first quarter, bucking the typical trend of balance declines in the first quarter."
More alarming is the fact that overall delinquency rates, while not yet hot, are rising for most types of loans. It becomes more and more apparent that U.S. households are relying increasingly more upon that above-mentioned debt-load, including revolving debt, which is more dangerous in order to just maintain familial standards of living.
13F Season
Happy Holidays. I can't summarize everyone's filing, but I can relay what I see happening over at Warren Buffett's Berkshire Hathaway ( BRK.A) ( BRK.B) during the first quarter (which ended a month and a half ago).
Adds:
1) Apple ( AAPL)
2) Occidental Petroleum ( OXY)
3) HP Inc ( HPQ)
Trims:
1) Chevron ( CVX)
2) Activision Blizzard ( ATVI)
3) General Motors ( GM)
Initiations:
1) Capital One ( COF)
2) Diageo ( DEO)
Exits:
1) BNY Mellon ( BK)
2) US Bancorp ( USB)
3) RH Inc. ( RH)
4) Taiwan Semiconductor ( TSM)
Largest Holdings:
1) Apple, by far.
2) Bank of America ( BAC)
3) American Express ( AXP)
4) Coca-Cola ( KO)
Attempted Breakout in Process
Not sure what I see here. It's not a cup, cup with handle, double bottom or some kind of ascending triangle.
I do know that Canadian Pacific Kansas City ( CP) is knocking on the door of a potential breakout and bears following:
Economics (All Times Eastern)
08:30 - Retail Sales (Apr): Expecting 0.7% m/m, Last -0.6% m/m.
08:30 - Core Retail Sales (Apr): Expecting 0.4% m/m, Last -0.4% m/m.
08:55 - Redbook (Weekly): Last 1.3% y/y.
09:15 - Industrial Production (Apr): Expecting 0.0% m/m, Last 0.4% m/m.
09:15 - Capacity Utilization (Apr): Expecting 79.7%, Last 79.8%.
10:00 - Business Inventories Mar): Expecting 0.0% m/m, Last 0.2% m/m.
10:00 - NAHB Housing Market Index (May): Expecting 45, Last 45.
16:30 - API Oil Inventories (Weekly): Last +3.618M.
The Fed (All Times Eastern)
08:15 - Speaker: Cleveland Fed Pres. Loretta Mester.
08:55 - Speaker: Atlanta Fed Pres. Raphael Bostic
10:00 - Speaker: Reserve Board Gov. Michael Barr.
12:15 - Speaker: New York Fed Pres. John Williams.
13:15 - Speaker: Dallas Fed Pres. Robert Lorie Logan .
19:00 - Speaker: Atlanta Fed Pres. Raphael Bostic.
19:00 - Speaker: Chicago Fed Pres. Austan Goolsbee.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: ( KEYS) (1.95)
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